Friday, April 7, 2006

CRTC Forbearance Decision - Here We Go Again

Yesterday's CRTC decision on telecom forbearance and competition stands in stark contrast to the recommendations put forth by the Telecom Review Panel late last month.

I'm not a regulatory expert, but here are the main points and takeaways I see here...

The threshold for forbearance has been set at 25%. This means that an incumbent telco cannot compete on the same playing field as the competition (cable included)for VoIP until they have lost 25% market share. Well, that's one way to tie their hands, and the ILECs are predictably not happy about this. As per Bell's press release today, they are "profoundly disappointed". That's easy to understand from their point of view, especially since the forbearance threshold for competing in the cable market is much lower at 5%. On the other hand, virtually everyone has a phone, whereas when the cable regulations were crafted, market penetration was considerably below 100%. As such, there was still a lot of virgin territory to fill there, so there was less concern about monopoly control.

So, if I'm going after the incumbents, I know I'm pretty safe poaching their customers up to 25%. If I feel I can compete with them, then I continue to aggressively go after new business. But if I think it's futile to compete, and if I can make money with a small slice of the market, I'll just cherry pick around the edges up to 25%

The CRTC did make a concession to the incumbents by paring back the winback period from 12 to 3 months. So now the ILECs only have to wait 3 months before they can contact lost customers and try to woo them back. That said, the red tape is pretty onerous, it still looks like the deck is stacked in favor of the competition to keep these customers.

I'm not anti-competition, don't get me wrong. The CRTC has, at its core, a mandate to encourage competition, but their model just doesn't work very well given the nature of Canada's competitive landscape. It really is impossible for them to please everybody, and the overall impression is that they have too strong a role to effectively let VoIP take root in Canada.

Since this decision is what sticks, and the Telecom Review Panel is just a report, you'd have to say the forbearance is a win for the competition, and another setback for the ILECs. So, it's good news for cable, good news for ISPs, and good news for VoIP pureplays.

Is it good news for consumers? I'm not so sure. Maybe so in the short term, as competitors don't have to worry about being quashed, so they have more of a free hand to do their thing. However, longer term, we're just seeing a continuation of the regulatory regime that most people view as being out of step with reality. I think the TRP has a better sense of vision for Canada, but the reality there is that their recommendations may not get acted upon for quite some time given we have a different government in power than when the report was put together. What's next? Your guess is as good as mine.

1 comment:

ipcom said...

Posted by: Jeremy Maddock

It seems a bit silly to regulate potential competitors out of the market so harshly, but it\'s telecom providers (at least in the US, and probably Canada as well) that want to do away with net neutrality and ultimately charge VoIP operators out of business.

What don\'t all these people understand about the concept of fair competition.